Microsoft and HP agree to jointly invest $250M over the next 3 years. For what?

Posted by Staff   |   Thursday, January 14th, 2010   |  

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Yesterday Microsoft and HP announced a 3-year agreement to spend $250M on several fronts: Hyper-V and System Center, Windows Azure, Exchange, SQL Server and more.

The problem with such announcements (see the 3-year alliance with EMC for another example) is that just a few (to not say nobody) really understand what’s the difference between before and after the deal.
The language used in the press announcements never helps.

Microsoft and HP already are very good partners. Customers expect the option to have Microsoft products inside their brand new HP servers at the purchase time because this happens since a lot of year.
So this deal requires some clarifications (of course we’ll focus on Hyper-V, System Center and Azure):

  • Part of the investment is to develop new integrated offerings that involve Hyper-V Server, System Center Essentials, HP Virtual SAN appliance (formerly Lefthand Networks), HP Flex Fabric and HP Operations Center.
    Specifically, HP is now able to OEM Hyper-V in future bundles rather than just offering it as a preconfigured option for its ProLiant customers. Additionally, HP can also OEM System Center Essentials and SQL Server.
  • Part of the investment is to pump up the sales channel (at worldwide level) and the professional services that will sell and support the products above.
    The investment in the sales channels will be 10x the actual one.
  • The announcements has been used to highlight that Microsoft will continue to buy HP ProLiant and BladeSystems for the Windows Azure cloud infrastructure.
    This doesn’t mean that HP is or will be the only hardware provider for Azure.

Now, despite Steve Ballmer and Mark Hurd clarified that this deal was discussed no less than two years ago and that it was approved in April 2009, it’s very likely that its execution has been impacted by the VMware-Cisco-EMC (VCE) alliance.

The leadership of HP is threatened by the entrance of Cisco in the server market primarily because Cisco is not just trying to sell bare metal, it’s trying to sell a complete hardware/software platform that doesn’t require any interaction with other vendors.
On paper, this is the peace of mind for every data center admin.

For now this platform is limited to a “simple” bundle of vSphere, the Unified Computing System (UCS) blade system and the Ionix Unified Infrastructure Manager, a super console kindly developed by EMC.
But soon the three may come out with a totally integrated implementation of the VMware vCloud APIs, turning a set of specifics into a concrete private cloud facility (Vblock 4 anyone?).

HP didn’t just lose the opportunity to do this first. It also (partially) lost a key partner, VMware, which is executing its cloud vision with someone else.
So HP buys 3Com to reinforce its enterprise-grade networking offering, and announces a major commitment to work with Microsoft. 
And the target is not just the VCE Vblock offering. The virtualization market’s money is on professional services. So the target also is the joint venture that Cisco and EMC created: Acadia.

At the lowest level, this agreement is not about developing some amazing new virtualization platform that can slam the Vblock. It is about avoiding that Cisco sells too many Vblocks.

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